The purpose of Rights Issue is to meet our needs of business development and strategy execution in the future several years. Looking into the future, we expect the domestic operator market is going to sustain its steady growth. We also anticipate exciting growth opportunities ahead in the domestic non-operator market, overseas market and the support service market driven by the global informatization sector. Considering the above, we aim to transform from "the largest support service provider for telecom operators in China" to a "leader of producer services for global informatization sector", with revenue reaching hundred billion Renminbi and excellent performance.

Thus, we will expand our customer base and service scope, and continue to improve management and technology, develop highly flexible, collaborative and efficient model of intensive management. More importantly, we will transform from the "labor-intensive business model" focusing on subcontracting projects into "technology & management focused business model" targeting EPC (Engineering, Procurement and Construction)projects.

The execution of the above strategies have higher funding requirement due to several reasons. First, more investment and upfront payments will be required for new markets development and transformation from focusing on subcontracting projects to EPC projects; Second, new technologies and business model have resulted in more investment for R&D; Third, we need to obtain necessary resources for further development through strategic asset acquisitions and JVs to enhance our core capabilities.

The Company announced on 30 March 2011 that it will seek the approval of the Shareholder for raising "not more than RMB6 billion" through its Rights Issue plan on a basis of "up to 4 Rights Shares for every 10 existing Shares". On 8 May 2011, the Company issued another announcement and further confirms that (i) the basis of the Rights Issue, originally stated to be "up to 4 Rights Shares for every 10 existing Shares", is confirmed to be "up to 2 Rights Shares for every 10 existing Shares"; and (ii) the proposed fund raising size, originally stated to be "not more than RMB6 billion", is confirmed to be "not more than RMB4 billion". Details in relation to the proposed Rights Issue were disclosed in the relevant announcements published by the Company.

The proposed Rights Issue will be subject to Shareholders' approval on 28 June 2011 at the Extraordinary General Meeting, the Domestic Shareholders Class Meeting and the H Shareholders Class Meeting, respectively. The Rights Issue will be also subject to the approval of the CSRC, the SASAC and other relevant regulatory authorities before the commencement of Rights Issue. The subscription price of the Rights Issue is expected to be determined with regards to prevailing market conditions before the commencement of the Rights Issue. Prior to the commencement of the H Share Rights Issue, the Company will make a further announcement and issue the H Share Rights Issue Prospectus which will contain relevant details of the Rights Issue.

In the "12th Five-Year Plan" period, the Group will firmly grasp the following six major development opportunities: (1) various demands resulting from the full-service operation adopted by the telecommunications operators and continuously growing demands of recurring businesses including network optimization and maintenance; (2) large scale investments in the two-way upgrading of broadcast and television networks in the future; (3) significant annual informatization investments from several industries driven by policies, technologies and social development; (4) the continuous and vigorous demand of the telecommunications network construction in overseas emerging markets such as Africa, the Middle East, Latin America and the Asian Pacific region; (5) new opportunities stimulated by new markets and new businesses as a result of the change in industrial landscape and models, including the Three Networks Convergence, the joint construction and sharing of telecommunications infrastructure, energy saving and emission reduction; and (6) greater potentials in respect of the Group's external growth assisted by the recovery of the capital market among the TMT sector in the "post-crisis era", to achieve the significant development of the Group.

In 2010, the Group recorded total revenues of RMB45,417 million, representing a year-on-year growth of 15.0%. Profit attributable to equity shareholders amounted to RMB1,818 million, representing a year-on-year growth of 13.7%. The sustained and healthy growth of our operating results was mainly attributable to the successful expansions by the Group in the domestic non-operator market and overseas market, as well as the prompt response to the demands for support services from domestic telecommunications operators.

In 2010, benefited by the rapid progress of informatization in China and the strong demands in the overseas telecommunications market, the combined revenue of domestic non-operator market and overseas market amounted to RMB15,953 million , representing a 32.6% year-on-year growth and accounting for 35.1% of total revenue, compared to 30.4% of total revenue in 2009. Domestic non-operator market and overseas market have become the major drivers of the Company's revenue growth.

Despite the fact that the CAPEX in the domestic telecommunications industry in 2010 decreased by 14.2%, we, on the one hand, effectively enhanced our market share by improving our service quality and enhancing our neutrality and achieved favorable development in the telecommunications operators market; on the other hand, other than network construction, we continued to provide our integrated services covering the operators' entire value chain including BPO and ACO businesses, such as network maintenance, system integration and mobile Internet, leading to a 7.2% growth of revenue from domestic operators to RMB29,464 million in 2010.

Our domestic non-operator customers include government agencies, media enterprises, infrastructure enterprises, energy sector related enterprises, telecommunications equipment manufacturers, public service unit such as educational and medical institutions and small to medium-sized enterprises. The Group is able to smoothly apply its experiences in serving domestic telecommunications operators and relevant technical expertise to the ancillary communications engineering services required by domestic non-operator customers in China. In 2010, facing the market opportunities in ancillary communications engineering services brought about by huge construction investments of domestic non-operator customers in infrastructure and public facilities, such as the Three Networks Convergence, energy saving and emission reduction, expressways, high-speed railways, subways, airports, ports and stadiums, the Group endeavored to capture these opportunities by improving its service and product systems targeted at domestic non-operator customers and enhancing the synergies in its marketing across different businesses, so as to promote brand awareness and marketing capability and achieve rapid revenue growth from the domestic non-operator customers. In 2010, the revenue from domestic non-operator customers reached RMB13,728 million, representing a year-on-year increase of 27.8%. Its proportion of total revenue increased to 30.2% in 2010 from 27.2% in 2009.

The huge domestic non-operator market potential will become one of the Group's key growth drivers in the future. The Group will exploit the huge market potential triggered by China's urbanization, informatization and the Three Networks Convergence, focus on the demand for informatization for government agencies and sectors such as transportation facilities, energy and construction, and vigorously explore domestic non-operator market.

The Group firmly implemented its overseas expansion strategy, and applied its technical advantages in serving the world's largest communications networks into capabilities in obtaining communications construction projects in developing countries. In 2010, the revenue from overseas markets was RMB2,225 million, representing an increase of 73.0% over last year. Its proportion of total revenue has increased to 4.9% in 2010 from 3.3% in 2009.

In 2010, the Group focused on its expansion in Africa, the Middle East, Latin America and other regions, while actively expanding into Australia, New Zealand, Eastern Europe and other countries and regions. We provided services such as infrastructure communications construction, business network construction, network maintenance and weak current system construction and maintenance for local telecommunications operators, government agencies and corporate customers. In addition, the world's well-known telecommunications equipment manufacturers are also important overseas customers of the Group. The Group has entered into strategic cooperation agreements with them to further explore their large-scale construction services market. In 2010, the Group continued to reinforce its strategic cooperation with companies such as telecommunications equipment manufacturers, financial institutions and large state-owned enterprises by leveraging on the advantages of each other to jointly expand the communications EPC (Engineering, Procurement and Construction) business in overseas markets and to achieve breakthroughs in winning EPC projects.

The overseas business will also become one of the Group's key growth drivers in the future. The Group will strengthen its overseas market expansion by focusing on regions such as Africa, the Middle East, Latin America and the Asian Pacific, and continue to reinforce its strategic cooperation with telecommunications equipment manufacturers in order to achieve the win-win situation.

China Comservice (China Communications Services Corporation Limited) is a leading service provider in the PRC that provides integrated support services in the informatization sector including telecommunications, media and technology. It is also the largest telecommunications infrastructure service provider in the PRC. Our services include telecommunications infrastructure services(TIS) covering design, construction and project supervision; business outsourcing services (BPO) covering maintenance, distribution of telecommunications services and products, and facilities management; applications, content and other services (ACO) covering IT applications, Internet services, voice VAS and other services. (Please refer to "Corporate Profile" and "History" for more details)

The Company was listed on the Stock Exchange of Hong Kong on December 8, 2006. The offering price was HK$2.20 per share. (Please refer to "Corporate & Shares Information" for more details)

All major telecommunications operators in China, namely, China Telecommunications Corporation ("China Telecom"), China Mobile Communications Corporation ("China Mobile") and China United Network Communications Group Company Limited ("China Unicom") are our customers. We also provide services to domestic non-operator customers and overseas customers. In 2010, the revenue from telecommunications operators accounted for 64.9% of total revenues, while the revenue from domestic non-operator customers and overseas customers accounted for 35.1% of total revenues.

Our domestic non-operator customers include government agencies, media enterprises, infrastructure enterprises, energy sector related enterprises, telecommunications equipment manufacturers, public service unit such as educational and medical institutions and small to medium-sized enterprises. The Group's business covers China and over 50 countries and regions in the world. The Group is able to smoothly apply its experiences in serving domestic telecommunications operators and relevant technical expertise to the ancillary communications engineering services required by domestic non-operator customers in China and its overseas customers.

China Telecommunications Corporation is our controlling shareholder which holds 3,036 million domestic shares, representing 52.6% of our total issued shares. In addition, China Mobile Communications Corporation and China United Network Communications Group Company Limited hold 507 million and 236 million domestic shares, representing 8.8% and 4.1% of total issued shares respectively. The public holding is 1,993 million H share, representing 34.5% of our total issued shares. (Please refer to "Shareholding Structure" for more details)

We provide a full range of telecommunications infrastructure services ("TIS") to telecommunications operators. The services include network planning and design, infrastructure construction and installation, project supervision and management for all types of networks including wireline, broadband or mobile networks based on various technology standards. In addition, we also provide integrated solutions for ancillary communications networks, including ancillary communications engineering services and operating support services, for domestic non-operator customers such as government agencies, telecommunications equipment manufacturers and broadcasting and television enterprises, as well as overseas customers. (Please refer to "Business Review" for more details)

We provide distribution service (distribution of telecommunications services and products) mainly to the telecommunications operators and equipment manufacturers. The services include the supply and distribution of telecommunications machineries and mobile phones, telecommunications agency service, logistics and procurement agency services, etc. (Please refer to "Business Overview" for more details)

As an integrated support service provider, our provision of distribution service enables us to cover both front end and back end services all along the value chain of telecommunications operator customers. This helps us to provide integrated services serving all aspects of the value chain, strengthen our competitive advantage of comprehensive one-stop service provision and promote our service value, therefore improving our customer loyalty and benefiting our long term business development.

ACO means Applications, Content and Other services. We are a provider of value-added services with great potential in China. We provide system integration services (including the development and construction of supporting systems OSS, BSS and MSS), Internet services (including mobile Internet applications and platform development) and voice value-added services and other services for telecommunications operators, government agencies, enterprise customers and other public customers. (Please refer to "Business Overview" for more details)

As a long term incentive and according to the regulations of the government, our company adopted a share appreciation rights (SAR) scheme to align the interests of target employees with the company. Under the scheme, a SAR constitutes the right to receive an amount of cash equivalent to the appreciation, if any, in the fair market value of an H share of our company and the exercise price of the SARs. No shares will be issued under the scheme; accordingly, the shareholding of the shareholders of the Company will not be diluted by any grant of SARs.

We always make great efforts in generating stable returns for our shareholders. Since the Company's listing, it has been increasing its dividend per share and sustained its dividend payout ratio of 40%. In future, we will determine our dividend policy by taking into consideration of the factors such as business development needs, CAPEX requirement, cash flow status and M&A opportunities. (Please refer to "Dividend History" for more details)